Deforestation: Can companies really make a difference?
Deforestation and land-use change1 account for nearly 12% of global greenhouse gas emissions. Deforestation is at the heart of climate issues, however it plays a paradoxical role: it is both a driver of climate change and a victim of its effects.
Over the last thirty years, an area equivalent to that of India has been deforested, i.e., more than 400 million hectares. Deforestation now accounts for nearly 12% of global CO2e emissions.
On the flip side, forests could contribute between 20 to 30% of the mitigation efforts required to limit global warming to 1.5°C. However, investments remain insufficient to mobilise the potential of the forest, with forest related activities attracting only 3% of funds dedicated to the fight against climate change.
Business activities are already being impacted by deforestation and its consequences, including: disruption of supply chains, rising raw material costs, reputational risks, etc.
In addition, companies have just one year remaining within which to define and implement their approach to the fight against deforestation, before they will face financial penalties.
Whilst a longstanding topic discussed at global events such as the COPs (Conferences Of the Parties), the impact of deforestation is now also a key concern of companies and legislators alike. The recent postponement of the entry into force of the European regulation on deforestation, which was initially planned for 2024 and now set for 30 December 2025, is regrettable in many respects. However, this leaves companies with one year to strengthen and refine their policies in order to combat deforestation.
- How do new regulatory or voluntary frameworks (EUDR, SBTi FLAG, ...) transform companies' obligations on deforestation, and what sustainable value opportunities can these transformations bring?
- How can companies identify, measure, and manage their impact on deforestation?
Combating deforestation: a global challenge with multiple issues
The urgency to preserve forests in the face of overexploitation of land and climate challenges
According to a report by the FAO2, 420 million hectares of forests were deforested between 1990 and 2020, an area larger than that of India. Deforestation now accounts for 45% of CO2e emissions from the land sector3. Despite a slower pace observed over the last decade, the phenomenon persists, particularly in South America and Asia, with visible consequences to the daily lives of millions of individuals. The conversion of forests into agricultural land and pasture is the main driver, which in the 21st century accounted for 88% of the world's deforested areas4. Brazil (mainly for pasture development) and Congo (mainly for agriculture, timber and mining) are two of the countries that have experienced the largest loss of forest cover over the past decade1.
Deforestation is a significant climate challenge : On the one hand, carbon previously stored in felled wood is partly re-emitted when the wood is burned, and the soil also releases carbon, sequestered in the past. On the other hand, the felled forests will no longer grow and be able to sequester and store atmospheric carbon and thus mitigate the effect of climate change.
Even if this phenomenon often takes place far from European borders, WWF highlights that in 2017, the European Union was still responsible for 16% of global deforestation through its imports, called imported deforestation. As such, 116 million tonnes of CO2e were emitted5, i.e. approximately 3% of the European Union's annual emissions6. China, however, remains the leading contributor to deforestation, with nearly 25% of global deforestation through its imports7.
Many mitigation measures can already be activated quickly and at low cost for natural ecosystems (protection, improved management of forests, peatlands, coasts, savannahs and grasslands, etc.) as well as for agriculture (improved soil, fertilization and herd management, agroforestry, biochar, etc.). The IPCC estimates that by combining these measures with others downstream of production (changes in diets, reduction of food waste, etc.), the land sector represents a mitigation capacity corresponding to 20 to 30% of the global mitigation potential needed to limit global warming to 1.5°C9. In particular, the emission reduction and sequestration potential associated with measures relating to natural ecosystems represents about 20% of current GHG emissions, for measures ready to be deployed in most cases without technical obstacles (reduction and sequestration potential of 7.3 GTCO2e per year on average until 2050). This paradox can be explained by the difficulty of coordinating different actors (farmers, forest owners, policymakers, etc.) and carrying out a profound transformation of long-established agricultural and forestry practices. Moreover, although the initial costs of implementing these measures are often limited, continuous investments over long periods are necessary to ensure their sustainability: the time horizon for biomass growth, for example, is not compatible with that of typical financial investment parameters. Forests and agriculture receive less than 3% of climate finance but represent 30% of the solution to the climate crisis10. Finally, existing financing mechanisms are not always adapted to this type of action, and international funding dedicated to climate initiatives (such as the Green Climate Fund, whose objective of 100 billion in investments per year has never been achieved due to a lack of subsidies, or the Global Environment Facility) are often insufficient.
Christian Didier
